Commercial Lending Basics

When it comes to commercial lending you may think you only have a few vital avenues to take. But, the truth is there are several different avenues or sources for commercial lending you just need to know where to look.

The wonderful world of commercial lending is comprised of more than just hard money, private money, and banks. If you have been in the business for a while, you may already know you lending choices are far greater than just the above-mentioned three. Nevertheless, it almost goes without saying that with more options ultimately comes more research as well as more time spent evaluating, which option is the right one for you.

4page_img6Therefore, if you are not afraid of a little extra research you will quickly find that you can also turn to government agency lenders, insurances companies, portfolio lenders, CMBS lenders, SBA loans—just to name a few. Let us start with government agency lenders, these lenders are basically Fannie Mae and Freddie Mac. Typically, with government-backed financing, you see separate loans being pooled together in order to sell to investors. On the other hand, if you do a quick search of insurance companies that offer commercial financing programs, you will find that there are only a select few that offer such programs. However, the good news is that insurance companies that do offer commercial financing are not held to the same regulatory standard as many of the other lending avenues; thus, you are able to customize your loan packages with greater ease.

When you are dealing with portfolio lenders, you are working with semi-traditional avenues such as local banks, corporations, and credit unions. Here, the real difference is that portfolio lenders do not pool their loans together to sell right away like government agency lenders rather they wait until maturity. Furthermore, portfolio lenders are held to your standard regulations just like traditional lending institutions, which means a reduction in flexibility. Thus, that leaves CMBS lenders and SBA loans.

The Real Deal on CMBS Lenders and SBA Loans

CMBS lenders are lenders that provide a variety of commercial financing. When dealing with these specific lenders, your loan will be transferred to their trust and then issued in several different methods in order to sell to investors. If this particular setup works for you then, you will find that there is a multitude of CMBS lenders to work with in your area. However, if you prefer financing that understands the inner workings (construction, purchasing of equipment, etc.) of small businesses then you should definitely look for a lender that offers SBA loans.

How to evaluate them all

Of course, if none of these additional avenues seems right for your particular commercial venture, it is perfectly okay to go with what you know. In other words, if hard money or private money is what you need to make this project happen then so be it. Ultimately, the takeaway here is that you need to do your research to understand your lending options. Moreover, you need to make sure that you working with a lender who’s goals align with yours.

Happy senior business man making his notes at workDennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC 
Private Hard Money Lender

Arizona Tel:  (623) 582-4444
Texas Tel:     (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

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About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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